Answer to Question #89566 in Economics for iman

Question

Pakistan cement industry has shown very fast progress in last few years and has
become a leading sector of the economy. At the time of inception, there were only
four cement plants in Pakistan which has now grown to over 30 units. Cement
manufacturers have also expanded their production capacity to meet higher demand
because of construction projects and CPEC. Maple Leaf Cement Factory Limited is
a reputable largest manufacturer of cement in Pakistan. The company was set up in
1956. Suppose the quantity demanded and quantity supplied functions of cement
industry in starting week of current month are:
Qd = 5000-6P
Qs= 1500+P
Where ‘P’ is the price in rupees per bag of cement and ‘Qd’ is quantity demanded of
cement in number of bags. ‘Qs’ is quantity supplied of cement in number of bags.
. What will happen to supply of cement, equilibrium price and equilibrium
quantity of cement if government gives subsidy to cement manufacturers?
Graph is not required ?

Answer 1

If government gives subsidy to cement manufacturers, then supply of cement will increase, equilibrium price will decrease, and equilibrium quantity of cement will increase.